War about critical minerals?

China, Geopolitics, and the Global South

Uwe Hoering, December 20, 2023

In summer 2021, Ukraine and the EU Commission signed a ‘Strategic Partnership on Raw Materials and Batteries’. Thierry Breton, Internal Market Commissioner with extended responsibility for defense and space, praised the “great potential of critical raw materials in Ukraine” to “reduce strategic dependencies”. The country has deposits of high-grade lithium, titanium, copper, manganese, rare earths and graphite, among others, and could therefore become a “key player” in the global transition to green technology. Some commentators are thus referring to the Russian attack on Ukraine as the “first lithium war”. After all, a side effect of the Russian invasion could be to thwart Europe’s plans for a secure supply of strategic, critical raw materials. Such considerations show the potentially explosive power of competition for critical raw materials for ‘green capitalism’.

“This partnership will contribute to diversifying the EU supply of raw materials and addressing
some of the strategic dependencies”

Thierry Breton, EU Commissioner

The supposed salvation from the climate catastrophe is not only driving extractivism, the exploitation of natural resources with serious social and ecological consequences. It also sets in motion a spiral of protectionism and billions in subsidies, often at the expense of social sectors. In addition, strategic raw material alliances lead to the formation of economic blocks and inefficient fragmentation into competing production and supply chains. It is often intertwined with geopolitical block formation, especially in the confrontation with China, which is already being waged with increasingly heavy-handed tactics. So could the Ukraine war indeed be the writing on the wall for a military escalation over critical resources?

At present, Western industrialized countries and their competitor China are still trying to secure supplies primarily by economic and political means. These include industrial policy measures to support the industry, the development of their domestic sources of supply, diplomatic missions and strategic raw material alliances, recycling and technological innovations to reduce dependence on imports of critical minerals. Currently, the United States and the European Union import up to 100 percent of the critical minerals needed for the ‘green transition’. It is estimated that demand will continue to grow exponentially. China is the spider in the web, controlling the processing, refining and manufacturing of key components such as batteries, and is therefore regarded as a threat to ‘national security’.

Meanwhile, raw material suppliers such as Indonesia, Chile and Zimbabwe are implementing export restrictions in an attempt to increase domestic processing and value creation and strengthen their position vis-√†-vis end customers. Indonesia, for example, the world’s most important nickel producer, has ambitions to become a production hub for e-mobility, in no small part through Chinese capital.

The battle is not just about a few minerals such as lithium, for which it may be easy to find alternatives, but about at least three dozen other raw materials. Moreover, it is no longer just about greenwashing capitalism and unlocking new opportunities for profits by further modernization. It is also about rearmament, which relies on raw materials such as titanium. And since most of these sought-after materials are located in the Global South, the possibilities of becoming more independent by developing production facilities in ‘safe countries of origin’ such as Saxony, Finland, the USA, Australia and Canada are limited. Technical progress and recycling can help to a certain extent, but in view of the predicted dimensions, it is more than questionable whether this will be enough to secure growth, prosperity and returns. Therefore, there is great pressure to secure supply by increasing influence on governments and domestic political developments in the countries of the Global South, whether through carrots or sticks, through promises such as Europe’s Global Gateway or through threats of sanctions if they cooperate with the wrong side.

“Industrial policy targeted at onshoring or building supply chains with allies is unlikely to reshape the
industrial geography of critical minerals any time soon.”

Mari Pangestu, former World Bank Director

The former World Bank Director for Development Cooperation, Mari Pangestu, considers the current attempts to secure supply through export restrictions, industrial policy support measures and competing block formation to be the “wrong answer”, both for the industrialized countries and for the commodity countries. She believes this is unlikely “to reshape the industrial geography of critical minerals any time soon.” Given her professional background at the World Bank, her alternative is hardly surprising – free trade and close economic cooperation: “Keeping trade open and predictable is as vital to resource-rich countries as it is to resource-poor countries”, she argues, and would help to increase and diversify supply. However, given the negative past experiences and the asymmetrical balance of power, it is doubtful whether this would really be to the advantage of the resource-rich countries.

Rhetorical preparations for an escalation of economic competition into a military confrontation are already in full swing. Like Manager Magazine, countless media outlets are talking about “China’s global lithium campaign” in view of its “aggressive approach”, as if the Western capitalist countries were not similarly keen on the critical raw materials and Beijing the only government on the war path. The use of economic arguments and measures for ‘national security’ is being ramped up on all sides. And just like with the oil wars in the past, a pretext could easily be found if necessary. It would certainly not be the first war to be fought over resources, even if this is often hidden behind lofty phrases about defending freedom, human rights and democracy. The suspicion of a hidden agenda is therefore not exclusive to the war in Ukraine. It also arises with some of the most recent military coups in Africa, for example in 2021 in Guinea, West Africa, where China had just entered into the development of the Simandou iron ore mine as part of a consortium with companies from France and Singapore.

Even more attractive than the recommendation of former World Bank Director Pangestu to defuse the conflict peacefully through a market economy solution, however, would be another, fundamental alternative: to renounce the delusion that green capitalism and exponentially increasing exploitation of nature will save further economic growth, prosperity and the planet in a single move.

Translated with www.DeepL.com/Translator (free version)

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